How We Respond to Fuel Economy Regulation

I have a start-stop car that is somewhat annoying. Driving to school each day, I follow a route that includes a three-mile stretch with five traffic lights. Because the red lights have been synched to curtail speed, I start and stop repeatedly. If I drive to NYC during the same day, I could start and stop (and hear the engine rev rather loudly) maybe 20 times.

The goal is energy conservation and emissions reduction. But is start-stop the best way?

The CAFE Menu

In 2012, NHTSA (National Highway Traffic Safety Administration) said its CAFE (Corporate Average Fuel Economy) mandate was a 27.5 mpg average for new cars. While now mpg targets vary with car size, we can say that the approximate current goal is up to 37.8 and for 2025, it will be 54.5 mpg.

Below you can see a summary of the CAFE fuel economy mpg targets for cars:

From: Data from Edmunds (2013)

For a start-stop car, a Ford executive tells us that the savings can average three to five percent. However, for someone in NYC traffic or a rush hour jam, the benefits can spike to 10 percent, especially if the wait is relatively long. Still though, a typical driver will save maybe $40 a year, not enough to appreciate the technology.

Our Bottom Line: The CAFE Incentive

Although most of us will not ask for start-stop, Ford, Buick and Fiat Chrysler are among the auto manufacturers who are planning to add it to more than half of their cars. Auto manufacturers also have the incentive to produce hybrids and lighter cars, diminish tire rolling distance and increase the number of transmission speeds.

As economists who know that the law of demand is what really makes us conserve–raise the price enough and we buy much less–we can ask why we use the CAFE approach. After all, in the U.K. we have a per gallon gas tax of $3.44 and a Ford Fiesta with an mpg average of up to 65.7 miles. In the U.S. with an average tax of 47.99 cents, the mpg number for the Fiesta is 31 (city and country combined).

But, will you vote for a politician that supports higher taxes or start-stop? And which would you really prefer?

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Elaine Schwartz has spent her career sharing the interesting side of economics. At the Kent Place School in Summit, NJ, she has been honored through an Endowed Chair in Economics and the History Department chairmanship. At the same time, she developed curricula and wrote several books including Understanding Our Economy (originally published by Addison Wesley as Economics Our American Economy) and Econ 101 ½ (Avon Books/Harper Collins). Elaine has also written in the Encyclopedia of New Jersey (Rutgers University Press) and was a featured teacher in the Annenberg/CPB video project “The Economics Classroom.” Beyond the classroom, she has presented Econ 101 ½ talks and led
workshops for the Foundation for Teaching Economics, the National Council on Economic Education and for the Concord Coalition.